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TMI Blog2024 (12) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... cretionary power vested with the AO for imposition of penalty vis- -vis object sought to be achieved keeping in mind the legislative intent. The purpose of reporting requirement of foreign assets/income in Schedule FA of the Income tax return is for and monitoring the investments held abroad by the residents of India. Preamble to the Act describes its objective to deal with problem of black money, i.e., undisclosed foreign income and assets. The said Act must not be invoked for punishing a technical /venial /bonafide breach of any statutory obligation and therefore bonafide actions of the tax payers must be excluded from the application of provisions of this stringent legislation. In this regard, we draw our force from the decision of Hindustan Steel Ltd. [ 1969 (8) TMI 31 - SUPREME COURT] Thus, admittedly it is not a case where foreign asset remained undisclosed in entirety and that there is any malafide intention or ulterior motive on the part of the assessee for not disclosing the same - thus penalty deleted - Decided in favour of assessee. - Shri Pavan Kumar Gadale, Judicial Member And Shri Girish Agrawal, Accountant Member For the Assessee : Shri Dharan Gandhi, CA, Shri Apur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate these facts. Assessee has also furnished form A2 filed with the bank requesting the remittance. Form 26AS reflected an aggregate foreign exchange (FX) taken of Rs. 1,14,62,510/- which included Rs. 1,09,47,000/- towards investment in question and the rest, aggregating to Rs. 515,510/- represented sundry FX taken on 05.07.18, 13.07.18, 11.02.19 and 07.03.19, all from the Bank account at HDFC Bank is also furnished in the paperbook. In AY 2020-21, the said investment was declared as part of Schedule AL. A sum of Rs. 18,33,12,166/- is shown as Shares and Securities and a break-up of the said sum, where a sum of Rs. 1,09,47,000/- (amount invested with ASK Global Strategy Fund) is a part of the total of Rs. 18,33,12,166/-. Thus, assessee asserted that the said investment was part of Schedule AL which was a part of the ITR for the year A Y 2020- 21. It was only due to inadvertence that the said sum was not included in Schedule FA of the ITR. 3.3. According to the assessee, the same was only an inadvertent error which is apparent from the following facts which clearly indicate that the omission could not have been intentional: 1. The investment was duly declared in the year when it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 43 of the Act according to which assessee contended that section does not specify that details of foreign assets must be disclosed in particular schedule, that is Schedule FA as alleged, of the income-tax return form. Assessee was under a bonafide belief that he is not supposed to disclose his foreign assets in any separate schedule such as schedule FA when the same had already been adequately disclosed in schedule AL as part of his assets and liabilities. According to the assessee, levy of penalty under section 43 is not mandatory but is at the discretion of the Assessing Officer since the word used in the said section is that Assessing Officer may levy penalty. It was submitted that legislature has given discretionary power to the Ld. Assessing Officer to decide the levy of penalty after considering all relevant factors including the purpose and object, the Act seeks to achieve. The discretion to impose a penalty puts the ld. Assessing Officer under a corresponding obligation to exercise the said discretion by taking into account the facts and circumstances of the case, holistically. Provisions of section 43 of the Act are extracted below: If any person, being a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us. This decision in turn placed reliance in the case of Ocean Diving Centre Ltd. v. CIT in BMA No. 22/M/2023 dated 30.08.2023 as well as in the case of Hindustan Steel Ltd. vs. State of Orissa (supra) by the Hon ble Supreme Court. The observations and finding arrived by the Coordinate Bench in the case of Rohit Krishna (supra) for Assessment Year 2016-17 are extracted below for ease of reference: 8. We have heard the parties and perused the material available on record and given thoughtful considerations to the rival claims of the parties. Admittedly, the Assessee has not disclosed the foreign assets in particular schedule i.e. FA Schedule, however, it is a fact that the Assessee has duly disclosed the foreign assets i.e. ESOP and its value in Schedule AL of the income tax return and the employer of the Assessee has also deducted the TDS on the value of the foreign asset/ESOP and shown the details/value of the same in Form No.16 Part-B as well as in Form No.12BA. Hence, it cannot be said that the Assessee has not disclosed the foreign assets in any manner. The Hon'ble Co-ordinate Bench of the Tribunal in the case of M/s. Ocean Diving Centre Ltd. vs. CIT BMA No.22/M/2023 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Manoj Mahendrakumar Pandya 6/Mum/2024 26.06.2024 ix) Rohit Krishna vs. CIT 11/Mum/2024 26.08.2024 5. For each of the above decisions, ld. Counsel for the assessee pointed out their key aspects including facts, judicial precedents relied upon, observations and findings arrived therein. The same are narrated seriatim to gain a meaningful and purposive perspective on the issue involved. i) ACIT vs. Tejal Ashish Mehta in BMA No. 5/Mum/2022, dated 03.04.2023 a. In this case, assessee had a life insurance policy of a foreign company, whose surrender value was declared u/s. 59 of the Act on which tax and penalty were paid. Declaration was made under one time compliance scheme which was accepted by the Revenue. According to the assessee, receipts on account of surrender were declared in the return of income in Schedule EI. Assessee was under bonafide belief that since policy was surrendered and was no more in existence, there was no requirement to disclose it in Schedule FA. On these set of facts, it was observed that for an asset ceased to exist on account of surrender and its maturity amount was duly reflected in income tax return thus bonafide mistake of not disclosing in Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee, penalty was deleted and appeal of the assessee was allowed. iii) Nirmal Bhanwalal Jain Vs. CIT in BMA Nos. 13 to 15/Mum/2023, dated 31.07.2023 c. In this case, assessee had made investments in offshore funds in his own name and in the name of his children including Harshita Jain (daughter) and other two minors. Assessee had disclosed investments made in his own name in Schedule FA in the return of income filed for Assessment Year 2016-17. However, investments made in the name of children inadvertently remained to be disclosed. Also, assessee due to oversight failed to mention increase in investment value in the Schedule FA against his own name. Assessee claimed it to be a bonafide mistake and placed reliance on the decision of Leena Gandhi Tiwari (Supra). By referring to the intent of the Act, it was observed that it is mandatory on the part of the assessee to report investments/assets held outside India. It was also observed that there is furnishing of inaccurate particulars of investments and that claim of bonafide mistake is unsubstantiated. c.1. It was held that though the contentions of the assessee may be true, but penalty u/s. 43 of the Act is levied for nonr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act which was treated at par with the return u/s. 139 of the IT Act. It was held that case of the assessee is not of deliberate or malafide or dishonest action or non-action or breach or defiance or disregard of statutory provisions of law. Penalty was deleted and appeal of Revenue was dismissed. vi) Ocean Diving Centre Ltd. vs. CIT in BMA Nos. 24 to 27/Mum/2023, dated 30.08.2023 f. In this case, assessee had invested in foreign entities, inadvertently not reflected in Schedule FA but duly disclosed in the balance sheet in Schedule Part A-BS under non-current investments . Observations were made in respect of discretionary powers in section 43 of the Act by the use of the word may . Reliance was placed on the decision of Hindustan Steel Ltd., (supra). It was held that it is not a case of total defiance or malafide or dishonest, breach/non-disclosure of information of foreign investment in Schedule FA. Penalty was deleted and appeal of the assessee was allowed. vii) Harshita Nirmal Jain vs. CIT in BMA No. 28/Mum/2023, dated 18.01.2024 g. It is a case where father, i.e., Shri Nirmal Jain (case dealt at Sr. No. iii) of the assessee made investment in the Global Dynamic Opportunities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be doubted for invoking the stringent provisions of section 43 for levying penalty. He further submitted that when there are contradictory views on the same issue, the view in favour of the assessee is to be adopted considering the decision of Hon ble Supreme Court in the case of Vegetable Products, (1973) 88 ITR 192 (SC). 7. Case of the Revenue is that provisions of the Act are strictly applicable and assessee is mandatorily required to disclose foreign assets in Schedule FA, failure of which would lead to imposition of penalty. According to ld. Sr. DR, disclosure of foreign asset in the return is not merely technical requirement without any purpose. It enables the Department to ensure proper investigation. Hence, its nondisclosure is to be viewed with disfavour. 8. We have heard both the parties and perused the material placed on record. We have also given our thoughtful consideration to provisions of the Act and long line of judicial precedents discussed above. Admittedly, assessee did not disclose his foreign asset in particular Schedule, i.e., Schedule FA though the same was duly disclosed in the Schedule AL in the item shares and securities in the Income tax return. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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